Impact of Inflation on Tourism Industry: Strategies to Overcome Negative Impacts

This poster discusses the impact of inflation on the tourism industry and provides strategies to overcome negative impacts. It includes the causes of inflation, its effects on business operations and performance, and ways to reduce its negative impact.

Project title
Student name
Student ID
Module name
Tutor name
Academic year/ Group

Introduction
Tourism industry is known as one of the fastest
developing industries in the world. Many
organizations establish their business into this
industry as it provides different opportunities for the
growth. But, after pandemic effect, tourist companies
faces different kinds of challenges that impact their
productivity along with profitability of the business.
Inflation is one of the challenges that provide a
dramatic impact in the industry. The key objective of
this poster is to identify the impact of inflation upon a
tourist enterprise along with strategies to overcome
the negative impact.
It is seen that since 2018, Hays Travel reached business sales by £1
billion. The main objective is to provide quality services to its customers
by considering their customer's needs and desires. As the customers have
different needs and desires such as budget, the respective organisation
helps in identifying the best destination where they can go while
providing all the necessary services to meet their requirements. The
company facilitates its services to destinations such as Portugal, Spain,
Malta, Greece and many more. Thus, this tourist company allows
facilities for all kinds of customers whether it is solo or group.
Conclusion
It is concluded that inflation term is used when there is an increase in the
prices of product or service and fall in consumer's demand. Inflation affects
overall economy in various ways. It involves challenges and problems for
businesses that leads to decrease in product or service demand, fall in revenue
of business, less spending power of consumer and many more. Focusing on
certain strategies could help company to increase the positive impact of
inflation on the business.
Theories or models to overcome the
negative impact of inflation while
enhancing the positive impacts.
It can be said that inflation is one of the most ordinary economic
challenges that are faced by the every organisations. It is important
to identify the strategies or methods to reduce the negative
influences of inflation on the businesses in tourism sector. The
following are some strategies to cope up with the inflationary
situation:
• Review the pricing regularly: Inflation can result in
increase in the prices for raw products or other materials which can
lift down the profit margins of the business. To overcome this
challenge, the company should regularly review the pricing
strategies, adjust them to make sure the company is still making a
decent revenue. It is important to be aware about the present prices
of raw materials and ensure the selling prices as well.
• Increase efficiency: By employing the right business tools,
training up to the employees, streamlining the processes. By
becoming more efficient in the business operations, negative
influence of inflation can be overcome while achieving the same
quality of results. Technology helps businesses to become more
efficient in their working and there are several things that the
company could spend in to push up the efficiency of business.
Hence, it is important to identify the right solution or digital tools
that ensure the positive impact on inflation on the business.
• Prepare for the worst: As the inflation could cause several
problems and challenges to the business, it is equally significant to
have a contingency plan in order to face the potential challenges. It
could cover downsizing the business operations, emergency fund,
selling the business completely and many more. It is fundamental
to take such challenges seriously and to ready for the worst
situations so the company could be less influenced by the inflation.
The chosen tourist organisation could think for debt management
plan that requires flexibility to face such problems.
Company background and
overview
Hays Travel is the largest independent travel
organisation in UK. It is famous for providing
outstanding customer services and great value
holidays. It provides services of low cost travel from
all inclusive offers to late deals, customised package
breaks and many more. The company is
headquartered in Sunderland, Tyne and Wear in the
year 1980. It has an experience of more than 40 years
in the industry. It has specialties in travel, holidays,
ski holidays, cheap holidays, package holidays,
family holidays and many more. It has over 450
branches all over the world.
Key operations and market
References
Deluna Jr, R.S., Loanzon, J.I.V. and Tatlonghari, V.M., 2021. A nonlinear ARDL model of inflation dynamics in the
Philippine economy. Journal of Asian Economics, 76, p.101372.
Goodhart, C.A.E., 2020. Inflation after the pandemic: Theory and practice. VoxEU.
Liu, T.Y. and Lee, C.C., 2021. Global convergence of inflation rates. The North American Journal of Economics
and Finance, 58, p.101501.
Katırcıoglu, S., Ozatac, N. and Taspınar, N., 2020. The role of oil prices, growth and inflation in bank profitability.
The Service Industries Journal, 40(7-8), pp.565-584.
Aziz, A., Li, H. and Telang, R., 2022. The Consequences of Rating Inflation on Platforms: Evidence from a Quasi-
Experiment. Information Systems Research.
Inflation period refers to the period where prices of products and services increases while decreasing the buyer power of
customers. This is the time where customers require to invest more money to consume something. Thus, it makes consumer to
spend less on unnecessary things in order to deal with the situation. The rate of inflation is calculated on monthly basis while
total inflation rate is calculated on annual basis by acknowledging the average inflation rate rate for all twelve months. People
do not want the situation of inflation as it makes them avoid purchasing or pay extra amount on the products or services. The
current inflation rate in UK is 9.90%. The following are some reasons that brings inflation in the country as well as it affects
the travel industry too:
• Primary causes: In an economy, when product or service demand increases its supply then the increased demand
pushes the price ahead. Whereas, when the factor prices rise, the production cost increases simultaneously. It leads inflation
and the increase in the product or service prices. In tourism industry, the company also increases the prices of tourism
activities when the demand rises. For example, in seasonal times, the rates of tour packages tend to get increase due to the
increasing demand on the services.
• Increase in public spending: In present times, government investment tends to take an important place in an overall
spending. It is also an essential factor in total demand. In general, in lesser developed countries, the government investments
rises which invariably develops inflation on the nation. In tourism sector, government take initiates to develop roads,
promotion of tourism destinations and many more.
• Exports: In an economy, the aggregate production must meet the national and international demand. Somehow, if it is
not able to meet the demand, then exports develops inflation in national boundaries.
• Tax reduction: While taxation are illustrious to rise with time, sometimes, taxation has been reduced by governments
to attain popularity among people. Citizens are happy to know that they have more monetary benefits in their hands to spend
on consumption purpose. Nevertheless, if the production rate does not enhance with the corresponding rates, the additional in
hand cash leads to inflation.
• The imposition of indirect taxes: Taxes are known as the key source of revenue of an economy. Sometimes,
government enforce indirect taxes such as VAT, excise duty and so on businesses. As such indirect taxed rises, the total costs
of sellers or producers also pushes up their prices of goods or services in order to have less impact on their revenue system. In
travel industry, many companies including Hays Travel also impose indirect taxes on their travel services so that inflation
would less impact on their revenue of business.
• Non-economic reasons: Inflation can be caused due to several non-economic factors. For instance, flood can damage
the crops which decreases the supply of agricultural items leading to rise in product prices.
• Price-rise in the international markets: Some of the goods need to import items or production factors from the
foreign markets. If such markets increases the prices of such items or production factors, then the aggregate cost of
production rises too. It leads to inflationary situation in the national economy
Impact of inflation on business operations along with performance
Due to inflation, travellers tend to avoid travelling and tourism products for consumption. Inflation leads to
increase in the prices of holiday packages and other tourism activities, which simultaneously leads the fall in
demand of such services in the tourism industry. In case of Hays, many of the consumers tend to switch
brand which gives similar services in low prices. Inflation also makes the company to cut off their prices to
attract the customers which reduced their profit margin as well. Inflation also leads to decrease the wages
and salaries of employees in order to cope up with the situation. It could lead employees dissatisfaction and
poor performance in the work. Therefore, there is a need to identify the ways or strategies to reduce the
negative impact of inflation in the tourism industry.
Inflationary periods and main causes